Daily analysis 07/18/2024

18. 7. 2024 - Josef Brynda

Latest news

• Europe's central bank hits pause on rate cuts as inflation takes its sweet time to come down to 2%
• New record high in Dow Jones, Nasdaq had worst day since December 2022. Nikkei closed Thursday down 2%
• Australian Dollar Strengthens Following Surprising Upside in Employment Data
• Gold retreats from record high amid Fed rate cut reconsideration; oil rebounds on US crude stockpile decline
• Strong 20-year U.S. Treasury auction leads yields lower with 10-year yields breaking their support 
• ECB monetary policy meeting and UK jobs data in focus
• Global chip stocks from Nvidia to ASML fall on geopolitics
• Fed Governor Waller Hints at Potential Rate Cuts Amid Economic Data Review
• Oil Prices Bounce Back After Government Report Shows Decline in US Crude Stockpiles
• Japanese Yen Strengthens Sharply on Expectations of Fed Rate Cuts in September
• Analysts expect continued strengthening of British pound after positive economic data
• Fed's Goolsbee and Logan to speak today, investors look for rate hints
• European shares opened higher on Thursday led by energy stocks, while investors also awaited the European Central Bank's interest rate decision, due later in the day.

News summary

• The European Central Bank (ECB) has decided to pause interest rate cuts as inflation in the Eurozone has not yet fallen to the target level of 2%. This decision could significantly impact the forex market, particularly the euro, which could remain stable or even strengthen if investors perceive this move as a sign of confidence in the Eurozone's economic recovery. On the other hand, European stock markets opened slightly higher on Thursday, with investors awaiting the ECB's rate decision, indicating that markets expect a positive development.
• The Australian dollar strengthened following surprisingly positive employment data. A stronger labor market can signal a healthier economy, potentially leading to expectations of interest rate hikes by the Reserve Bank of Australia. This could further strengthen the Australian dollar as investors seek higher returns in Australian assets.
• Gold pulled back from record highs as the Federal Reserve considers reassessing planned interest rate cuts. The drop in gold prices may be due to expectations of higher interest rates, reducing gold's appeal as a safe haven. Conversely, oil prices rebounded after a report of declining U.S. crude inventories, which may support commodity currencies such as the Canadian dollar and the Norwegian krone.
• A strong 20-year U.S. Treasury auction led to lower yields, with 10-year yields breaking their support level. Lower yields could weaken the U.S. dollar as investors seek higher returns elsewhere. The Japanese yen significantly strengthened on expectations that the Fed will cut interest rates in September, potentially further weakening the U.S. dollar against the yen.
• Analysts anticipate continued strengthening of the British pound following positive economic data. A stronger pound may result from expectations that the Bank of England will raise interest rates to combat inflation. Investors will also be watching speeches from Fed members Governor Waller, Goolsbee, and Logan, which may provide further clues on the future direction of monetary policy.
• Overall, financial markets are moving due to various economic and geopolitical factors impacting currencies, stocks, and commodities. Investors should closely monitor developments in these markets to better anticipate future movements and adjust their investment strategies accordingly.

5 Things You Need to Know to Start Your Day: Americas

16. 7. 2024 - Josef Brynda

Daily analysis 07/16/2024

16. 7. 2024 - Josef Brynda

Latest news

• The true bull market may finally 'wake up' as investors eye rate cuts
• The prospect of Trump becoming the next U.S. president boosts the stock markets
• US dollar gains continue, and yen weakness is making a comeback
• Gold Nears Record High Amid Fed Rate Cut Speculation; Oil Declines on Weak Demand Signals.
• Bond Markets Navigate Dual Impact of "Trump Trade" and Imminent Interest Rate Cuts.
• Bitcoin and Ethereum gained 10%
• S&P and Nasdaq rose on the back of Fed Chair Powell's optimistic remarks on US inflation
• The 10-year Treasury yield declines, remaining a couple basis points off its support level at 4.17%
• The dollar strengthens, the yen weakens, and the Australian and New Zealand dollar retreat
• Fed Chair Powell remained non-committal to a September rate cut
• The New Zealand dollar has been in a downtrend since the last RBNZ meeting that opened the door to a rate cut, and the Q2 CPI is out overnight.
• Bank of Canada’s quarterly survey highlighted growing pessimism and Canada’s CPI is due today, which will be key for whether the central bank cuts rates at the July meeting or not.
• Focus will also be on the US retail sales today.
• Concurrently, the prospect of a Trump victory, with anticipated policies such as tax cuts, higher tariffs, and deregulation, is expected to boost economic activity and potentially spur inflation, thereby driving long-term yields higher

News summary

• Expectations of an interest rate cut and the possibility of Donald Trump becoming the next US president are bringing optimism to the stock market. The S&P 500 and the Nasdaq rose thanks to Fed Chairman Powell's upbeat comments on US inflation. This optimism is further supported by Trump's expected policies such as tax cuts, higher tariffs and deregulation, which could boost economic activity and potentially boost inflation. This could lead to a rise in long-term yields.
• The strong dollar continues to strengthen on increased speculation on the Trump administration and expected policy changes. Conversely, the Japanese yen is weakening due to the large interest rate differential between Japan and other countries, causing interest in monetary intervention. The Australian and New Zealand dollars are also weakening, with the New Zealand dollar in a downtrend since the last RBNZ meeting, which opened the door to a possible rate cut.
• The gold price is near record highs on expectations that the Fed will cut rates. Oil, on the other hand, is falling due to weak demand. This trend may continue if speculation of a rate cut is confirmed, which could further support the gold price while keeping pressure on the oil price.
• The 10-year US Treasury yield is falling on expectations of a rate cut. If there is a further drop below 4.17%, yields could fall further to 3.78%. Conversely, if speculation of a Trump victory is confirmed, long-term yields could rise due to expected inflation.
• Today's economic reports suggest that investors should be cautious and closely monitor interest rate developments and political events that can significantly impact the markets. A strong dollar and expectations of rate cuts may present opportunities in the forex market, while stock markets could benefit from optimism regarding Trump's administration and potential Fed rate cuts.

Daily analysis 07/15/2024

15. 7. 2024 - Josef Brynda

Latest news

• Stock market evaluates the “Trump trade” as major earnings week begins.
• Modest gains for US dollar on rising bets for a Trump 2.0.
• Eurozone’s industrial production and Powell’s speech are in focus.
• Small Cap Index Russell 2000 continued its positive tone Friday after Thursday’s rally adding another percent.
• S&P 500 and Nasdaq recouped some of their losses but technically still drawing top and reversal patterns.
•  Pre-market US Equites are indicated to open a tad higher despite the dramatic event over the weekend.
• Apple's India sales jump 33% to near $8 billion last year.
• China’s Economic Growth Comes in Worse Than Expected, Adding Pressure on Xi.
• WTI crude futures trade around $82.40, gold is stable around $2,410, and Bitcoin rose above $62,500.
•  The New Zealand dollar underperforms among G-10 currencies, while the yen stabilizes around 158.
• This week earning reports from ASML, Danske Bank, AbbVie, Goldman Sachs, Netflix and American Express will be in focus.
• Treasury yields closed at 4.18% on Friday, a crucial support level prior to the weekend's events. If yields fall below this level, the next support lies at 3.78%. Conversely, there is potential for yields to rise to 4.47% before encountering resistance.
• The FOMC meeting will occur shortly after the June PCE data release; if these data mirror the deflationary trends seen in recent CPI numbers amidst rising political uncertainty, a rate cut becomes more likely.
• The US dollar opened higher at the start of new week following the assassination attempt on former President Donald Trump over the weekend. Markets have increased the probability of a second Trump presidency.
• The British pound remained resilient despite dollar strength after hawkish BOE comments last week.

News summary

• The New Zealand dollar has lagged among the G-10 currencies, mainly due to dovish comments from Reserve Bank of New Zealand Governor Orr, who said the official interest rate will remain unchanged for the rest of 2024. Meanwhile, the Japanese yen has stabilized around 158.
• The U.S. dollar has seen modest gains as markets increase bets on a possible second Trump presidency. Sterling remained resilient despite dollar strength, supported by hawkish comments from the Bank of England last week.
• Several key earnings reports are expected this week from companies such as ASML, Danske Bank, AbbVie, Goldman Sachs, Netflix and American Express. These reports will be closely watched by investors for insights on corporate performance and economic health.
• Treasury yields closed at 4.18% on Friday, a key support level. If yields fall below that level, the next support is at 3.78%. Conversely, yields could rise to 4.47% before hitting resistance. The upcoming FOMC meeting, which will take place after the release of PCE data for June, will be key. If this data reflects the deflationary trends seen in the recent CPI numbers amid growing policy uncertainty, a rate cut by the Federal Reserve becomes more likely.
• China's economic growth has fallen short of expectations, putting pressure on President Xi Jinping's administration to introduce more robust economic measures. This setback could have broader implications for global markets, particularly those with significant exposure to China.
• Based on the above factors, the dollar appears to have the potential to strengthen further in the coming days, especially with increased bets on Trump's second presidential term, positive economic news and continued political uncertainty. However, if there are more significant deflationary pressures or if economic data deteriorates significantly, this could lead to a weaker dollar. Investors should closely monitor upcoming economic data and political events.

5 Things You Need to Know to Start Your Day: Americas

11. 7. 2024 - Josef Brynda

Federal Reserve and Inflation Outlook: Federal Reserve Chair Jerome Powell is expected to emphasize the need for further evidence of inflation slowing before considering interest rate cuts in his upcoming Congressional testimony. Economists anticipate Thursday's release of June consumer price data to show easing cost pressures. S&P 500 futures remain stable following significant gains last week. Treasury yields saw slight increases, while the Bloomberg Dollar Spot Index maintained losses after its first weekly decline in seven.

Political Pressures on Biden: Influential Democrats are privately urging President Joe Biden to step aside as the party’s nominee after a challenging debate with Donald Trump. House committee leaders totaling nine members are among those making the call. Speculation on potential successors includes Vice President Kamala Harris and governors Gavin Newsom, J.B. Pritzker, and Gretchen Whitmer.

Bank Earnings Season Commences: JPMorgan, Wells Fargo, and Citigroup are set to kick off the US bank earnings season with expectations of continued market stability. Hedging costs for JPMorgan and Wells Fargo shares remain near 2021 lows, while Citigroup's protection is below its one-year average. Options markets predict muted volatility post-earnings, reflecting the low-volatility environment seen in the Cboe Volatility Index.

Boeing's Legal Settlement: Boeing has agreed to plead guilty to criminal conspiracy charges related to the 737 Max crashes, potentially facing a fine of $487.2 million. The settlement avoids a contentious trial and mandates corporate reforms and compliance enhancements.

Record Market Participation: Record numbers of Americans are investing in stocks, driven by younger generations starting investments at earlier ages. This trend reflects a cultural shift towards increased online financial engagement, alongside rising participation in stock trading and sports betting.

Inflation Debate and Policy: Warren Mosler discusses on the Odd Lots podcast the potential implications of high interest rates contributing to inflation. He challenges orthodox approaches, advocating for a permanent zero interest-rate policy to manage economic stabilization.

Daily analysis 07/11/2024

11. 7. 2024 - Josef Brynda

Latest news

• Fed would not wait for 2% inflation to consider rate cut: Powell.
• Rate cut hopes may bolster U.S. stocks as investors await earnings, elections.
• Japan’s 40-Year Government Bond Yields Hit 3% for First Time.
• The Reserve Bank of New Zealand's rate decision yesterday left rates unchanged, as expected. However, the tone was less hawkish than markets had expected.
• The market has shifted expectations of an RBNZ rate cut from November to October and now expects more than two rate cuts this year.
• US indices hit new records as the S&P 500 rose 1.02% and the Nasdaq 100 rose 1.09%, boosted by gains in semiconductors.
• Treasury yields were mostly unchanged after a $39 billion auction of 10-year notes attracted strong demand ahead of U.S. inflation data to be released Thursday.
• Swaps suggest two Fed rate cuts in 2024, with a higher probability of the first in September
• Attention is also focused on Japan, where the Ministry of Finance will auction 1 trillion yen in June bonds at a yield of 1.925% in trading.
• The Biden administration plans to impose new tariffs on steel and aluminum imports routed through Mexico to prevent China from circumventing existing tariffs through transshipment.
• Oil rose for a second day amid rising demand and a positive shift in broader markets. Global oil benchmark Brent climbed above $85 a barrel, following Wednesday's 0.5% gain, while West Texas Intermediate hovered around $82. U.S. inventories fell by 3.4 million barrels last week, with jet fuel and gasoline consumption rising as the summer travel season continues.
• Gold rose after Federal Reserve Chairman Jerome Powell told U.S. lawmakers he sees inflation falling, boosting hopes for a reversal in interest rates this year. The precious metal traded above $2,370 an ounce after a modest gain in the previous session.
• The U.S. dollar fell on Wednesday due to the slightly dovish tone of Fed Chairman Powell's testimony and market expectations for the release of U.S. inflation data for June, which should confirm deflationary trends.
• Sterling continued its strong performance on the back of dollar weakness, a stable post-election environment and a non-aggressive Bank of England rate cut following hawkish comments from members.
• Meanwhile, the euro remained in demand as it recovered from uncertainty following the French election and the final German inflation figure will be watched today ahead of next week's ECB meeting.
• The New Zealand dollar was also in the red as the RBNZ's hawkish stance fell short of market expectations.

News summary

• The current economic environment shows a complex interplay of factors that will influence currency markets. The dovish tone from the Fed suggests a potential easing of monetary policy sooner than expected, which could weaken the U.S. dollar further. This presents opportunities for currencies like the British pound and the euro to strengthen, especially given the political stability in the UK and positive economic signals from the Eurozone.
• Investors should watch for U.S. inflation data closely, as it will heavily influence Fed policy expectations. A lower-than-expected inflation print could accelerate the timeline for rate cuts, boosting equities and putting downward pressure on the dollar.
• In Japan, rising long-term yields indicate tightening financial conditions, which could impact the yen's performance. Meanwhile, the RBNZ's shift towards a more neutral stance may lead to further weakening of the New Zealand dollar, as market expectations adjust to a less hawkish outlook.
• Commodity markets are also playing a significant role. Rising oil prices reflect strong demand and can indicate a robust economic recovery, which generally supports commodity-linked currencies like the Canadian and Australian dollars. Gold's rise on the back of dovish Fed comments suggests that investors are hedging against potential dollar weakness and inflation risks.
• These developments impact the global economy and U.S. dollar. Strong stock markets could boost confidence and spending, supporting the dollar. However, Powell's testimony will be crucial. A dovish stance could weaken the dollar, while a hawkish tone could strengthen it. Diverging policies from the ECB and RBA will also affect currency dynamics.
• Overall, the current market sentiment leans towards a cautious optimism, with a focus on central bank policies and inflation data. Investors in the forex market should consider positioning for a weaker U.S. dollar while looking for opportunities in currencies backed by stronger economic and political stability.

Daily analysis 07/10/2024

10. 7. 2024 - Josef Brynda

Latest news

• Stocks Rise With Earnings Expectations at Record
• Record earnings expectations and a new S&P 500 high may strengthen the US dollar against other currencies
• Powell said in his testimony before Congress that the job market looks strong and is back to pre-pandemic levels, but the economy is not overheated
• Oil prices rose slightly in response to a report of a drop in U.S. crude and fuel inventories, suggesting steady demand
• Markets still expect the Fed to cut interest rates later in the year, although Powell was cautious in his comments
• China's Q2 GDP recovery likely lost momentum as consumption fell
• Microsoft to relinquish its observer seat on OpenAI board
• Dollar dithers on Powell caution; kiwi droops after RBNZ rate hint
• Powell Welcomes Cooling Inflation but Wants ‘More Good Data’ Before Rate Cut
• Mortgage holders bet on the Reserve Bank cutting the OCR sooner than it says it will (RBNZ)
• Auckland house values continue down - Quotable Value stats: ‘Five straight months of negative growth’ (New Zeland)
• BofA downgrades HDFC Bank, cuts target price after 20% rally from Feb-lows
• Chinese consumer prices rose by 0.2% in June; +0.4% was expected. Producer prices fell by 0.8%, meeting market estimates

News summary

• Record earnings expectations and a new high for the S&P 500 may strengthen the U.S. dollar against other currencies. Strong corporate profits boost investor confidence in the U.S. economy and attract foreign investment, increasing demand for the dollar.
• In his testimony before Congress, Jerome Powell stated that the job market is strong and has returned to pre-pandemic levels, but the economy is not overheating. This optimistic view on the labor market could support the dollar, although Powell remains cautious about lowering interest rates. Markets still expect the Fed to cut rates later this year, which could result in some uncertainty and volatility for the dollar..
• Slower Q2 GDP growth in China due to falling consumption might dampen global economic growth and, consequently, demand for the dollar. Additionally, the New Zealand dollar weakened after the RBNZ hinted at the possibility of lowering interest rates, adding another layer of uncertainty to the foreign exchange markets
• Powell welcomed cooling inflation but emphasized the need for "more good data" before the Fed considers cutting rates. This cautious stance indicates that the Fed remains vigilant and wants to see sustained signs of declining inflation before taking further action. 
• Other market developments, such as the decline in Auckland house values and Bank of America's downgrade of HDFC Bank after a 20% rally, highlight diverse economic conditions globally. Weaker growth in Chinese consumer prices and a drop in producer prices suggest a slowdown in global demand.
• In conclusion, the current economic landscape appears to favor a stronger US dollar in the forex market, driven by robust US economic indicators and a cautious Fed approach. However, this strength could present challenges for US exporters and potentially impact global trade dynamics. The broader economic outlook remains positive for the US, but with potential divergences in global economic performance that traders and investors will need to monitor closely.

Daily analysis 07/09/2024

9. 7. 2024 - Josef Brynda

• Global stocks mostly rise, with Japan's Nikkei 225 index logging record close
• Gold edges higher as investors await Powell's testimony
• The S&P 500 and Nasdaq reached new record highs.
• Boeing agreed to plead guilty to a criminal fraud charge related to 737 Max jetliner crashes
• Federal Reserve Chair Jerome Powell is scheduled to testify before Congress
• Oil Steady as Traders Assess Beryl’s Impact and Prepare for Fed
• ECB can continue to gradually lower rates, Panetta says
• Dollar gains ahead of Powell testimony; euro stabilizes
• Asia investors wager on region's rebound, China recovery
• Citi Says It’s Time to Book Profits in High-Flying AI Equities
• RBA could hike rates in August, supporting AUDUSD- UBS

News summary

• Global financial markets show mixed signals as investors await key events and digest recent economic data. Japan's Nikkei 225 and U.S. markets, including the S&P 500 and Nasdaq, have reached record highs, reflecting confidence in economic recovery and corporate earnings.
• Gold prices have risen slightly as investors anticipate Federal Reserve Chair Jerome Powell's testimony, which could influence asset classes and currencies. This increase indicates caution, with investors seeking safe-haven assets ahead of possible market-moving statements.
• Boeing has agreed to plead guilty to a criminal fraud charge related to the 737 Max jetliner crashes. While significant for Boeing, the broader economic impact is likely limited. Oil prices remain steady despite Tropical Storm Beryl, reflecting balanced supply-demand dynamics.
• ECB official Fabio Panetta suggests gradual rate cuts, contrasting with a potential interest rate hike by the Reserve Bank of Australia (RBA) in August, highlighting diverging monetary policies.
• These developments impact the global economy and U.S. dollar. Strong stock markets could boost confidence and spending, supporting the dollar. However, Powell's testimony will be crucial. A dovish stance could weaken the dollar, while a hawkish tone could strengthen it. Diverging policies from the ECB and RBA will also affect currency dynamics.
• China's economic recovery is another key factor, potentially boosting demand for commodities and impacting currencies of major exporters, which could pressure the U.S. dollar.
• In summary, the market landscape is complex with various factors influencing economic outlook and currency movements. Powell's testimony will be key, potentially clarifying the Fed's policy and impacting the dollar and global markets. Investors should prepare for potential volatility